What Are SMS Payments and How To Use Them?

With mobile commerce sales rising quickly every year, local businesses are finding creative ways to provide a seamless shopping experience for today’s active smartphone users. And what have they found? 

If you want to be a brand that’s ahead of the curve, SMS payments should be the next solution you set your sights on.

But don’t worry. We’re here to help. In this article, we’ll cover what an SMS payment is, how it works, and when you can benefit the most by adding this payment option to your checkout point. 

What is an SMS payment?

SMS payments, otherwise known as short message service payments, are a modern alternative to traditional payment methods—such as cash, checks, and credit cards—that allow users to pay with a simple text. They trigger when a purchase is initiated via SMS and completed on a customer’s smartphone. 

Instead of requiring consumers to log into a website or wait in long checkout lines, this mobile payment method enables them to complete transactions quickly on a device that’s likely already in hand. Typically, this text-to-pay option minimizes the number of actions and channel switching that it takes for a buyer to convert, buy again, or pay what they owe.

Even as SMS payments make successful purchases possible in 160 characters or less, they’re still highly secure transactions. Your customers will never have to share personal data (including account details) directly in their text messages, so they won’t be susceptible to any unexpected risks. 

How do SMS payments work?

The SMS payment process always begins with a shopper sharing their mobile phone number with your business. (Pro Tip: Using a collection feature such as Webchat makes it easy to collect contact information that you need to reach out to.) 

After a customer has provided their phone number and opted into texts, it’s your job to initiate a payment. A well-designed platform guides your customers toward a purchase via textable links to a secure payment processing platform. 

After tapping on this link, the buyer can view and pay their invoice simply by entering their account information. And that’s all there is to it to make a new sale or bill payment happen. You can then automate sending a receipt to your customer, allowing you to continue the conversation beyond payment with ease.

Advantages and Disadvantages of SMS Payments

Now that we’ve covered the basics, let’s talk shop. SMS payments are an incredibly powerful tool for any local business. However, they come with their own set of challenges that are important for you to know about. 

Pros of SMS payments

Why don’t we start with the pros. What makes SMS payments so revolutionary? 

Instant payment.

Compared to mailed bills, emailed invoices, and other traditional methods of initiating payments, the SMS payment process can create faster results by meeting buyers through a more convenient platform. Text significantly reduces overdue and unpaid invoices for local businesses, taking the stress off your accountants and giving you more time to do what you do best. 

Automated notification and processing.

With the right system, you can set up your SMS payments to send automated notifications and updates about payments and processing to your customers, markedly increasing convenience for you and your customers. (Starting to realize how many of these benefits are mutual? We love it too.)

Meets consumer expectations.

Since the pandemic, expectations have changed. 7 in 10 customers don’t feel comfortable reading their card number to you over the phone. A quarter of consumers will abandon their transaction with you if they don’t see their preferred payment method offered. SMS payments meet, and often exceed, consumer expectations by broadening the number of payment methods you accept and empowering your customers to use their mobile wallets.

Increases convenience.

Unsurprisingly, SMS payments are one of the easiest ways for customers to send money in exchange for a product or service. ✅ Customer satisfaction. No matter what type of company you own, they can speed up the checkout process and build an easy and efficient customer experience. Text message payments can also push shoppers through the sales funnel before they become disengaged.

Cons of SMS Payments

Now let’s address some challenges. What should you keep an eye on? 

Feels insecure.

For some customers, SMS payments feel insecure. Texting…a link to a payment page for a large invoice…you get the gist. However, just because it feels insecure doesn’t mean that it is. When you choose the right platform, SMS payments are actually very secure and keep the information of your clients safe and private. 

Feels intrusive.

We’ve all had spam-like texts from businesses. And we’ve all hated them. But the thing is, your texts don’t have to feel intrusive. When you text sparingly during appropriate hours, with relevant and personalized content, addressing your customers by name, your customers will feel seen instead of spammed. 

Feels non-human. 

Worried that SMS payments will bottleneck your in-person checkout point? Don’t be. For brick-and-mortar businesses, SMS payments allow your customers to skip the checkout line with just a few taps. You’ll also be better equipped to avoid counterfeit cash and fraudulent credit card payments without manually verifying your customers’ identities or using money markers. 

How to Choose an SMS Payment Provider

There are many SMS payment providers, but not all are built equal. So, how do you choose? We’ve found that the best way to choose a provider is by knowing what features to look for. Here are a few to get you started. 

1. PCI Compliance

The Payment Card Industry Data Security Standard protects information use and handling when it comes to your customer’s credit cards. The right platform is PCI compliant and built to prioritize keeping your customers’ payment information and card details secure. 

2. Automation Options

A good platform provides customizable automation options allowing you to pick the perfect point in your transactional processes to send a payment link, notifications, and texted receipts that allow you to seamlessly continue the conversation with your buyers. 

3. Usability

Small businesses need systems that are flexible enough to meet their changing needs–and those of their customers. A system that does it all might offer card reader options as part of their platform, meaning you can collect payment in-store and in the field and then send receipts directly to your customers’ phones.  

4. Customization

A platform like Podium’s text-to-pay option allows you to customize your invoicing process by branding your invoice and adjusting the payment methods you accept. For example, you may enable credit card and mobile wallet payments but prohibit direct transfers (ach) from bank accounts.

5. Two-Way SMS

No more texting “Y” for yes and “N” for no. With the right platform, you can engage in robust two-way conversations with your customers. Yes, real conversations that allow you to answer questions and build strong relationships before and after purchase.  

When to Use SMS Payments

Businesses can take advantage of the perks of SMS payments in a variety of situations. Because texting is such a popular channel for today’s tech-savvy shoppers, it becomes an obvious (and versatile) option for mobile payments. Here are a few situations in which SMS payments will become your business’s best friend.

1. Getting paid for your services.

Customers can easily let an invoice slip past them if it’s sent through a more traditional channel. After all, not everyone gets through their email or checks their mailbox every day. By making SMS payments available, you drastically increase the odds that your customers get the message.

Once the buyer receives your text message, they can easily—and immediately—pay you, whether you just fixed their windshield, finished a logo design, or tuned up their bike. And they can do so from anywhere. Paying through text messages can be a cashless and cardless experience that leaves little reason for customers not to send what they owe quickly.

Your SMS payment system can also simplify recurring payments, including those for subscription services, phone bills, and various software.

2. Chasing a past-due bill.

Your customers won’t always stay on top of their bills, even when they have the best of intentions. Sometimes, a little payment reminder is necessary to get them back on track.

Using an SMS payment solution, you can check in on your customer, send an invoice, and provide a link to a secure payment platform all through the same channel. If the buyer is having an issue that’s causing payment delay, they can simply respond, and you can showcase your stellar customer service skills without changing channels.

3. Extending your SMS marketing efforts.

Text payments are a natural way to close out sales and make conversions happen faster. 

For example, if a furniture store is answering a customer’s questions about a dining table’s measurements via text, they can offer to send an invoice as soon as the shopper confirms their interest. In this example, the store might be able to close the deal before the customer even shows up at their location.

SMS payments can be an extension of your ongoing relationship-building and customer service efforts, with the bonus of driving faster results for your bottom line.

 Make Text Your Billing Channel

Are you ready to get started? We’re feeling it too.

Podium is an all-in-one solution for payments and local business growth with proven solutions that drive revenue and customers. 

Through Podium Payments, you can gather reviews, build marketing opt-in lists, continue your conversations, and gain repeat customers, all while getting paid. With this payment option in place, you can simplify online and offline shopping for anyone with a smartphone.

By implementing a text message-based solution like Podium Payments into your business strategy, your marketing and payment processing efforts will meld together into one seamless experience. Learn how SMS payments work and get a demo of Podium’s platform to see how it can help your business grow.